Bank for development in Africa gathers strength in struggle against vast problems

ByPeter Blackburn, Special to The Christian Science MonitorOctober 5, 1984

Abidjan, Ivory Coast
— In a continent covered with debt and financial failures, the African Development Bank is a notable exception. Since its creation in Abidjan 20 years ago, the bank has steadily expanded its capital base and lending operations to become the continent's largest multilateral institution for financing development.

The African Development Bank group (AFDB) now has 50 independent member countries. It has lent nearly $5 billion to finance some 700 development projects in all member countries except Libya. Lending to the poorest countries - those with annual per capita incomes less than $400 - is managed by the bank's two soft-loan affiliates.

AFDB's Zambian president, Wila Mung'omba, stresses that the bank is ''neither a charity nor a social welfare agency, and its contribution to African economic and social development must lie in the finding and funding of economically justified activities.''

Nevertheless, the bank is often seen as a lender of last resort by its African member countries. With official development assistance from industrialized countries and multilateral aid organizations stagnating, AFDB has an increasingly important role in combating the continent's growing poverty.

The membership of the United States and 22 other non-African countries at the end of 1982 has greatly strengthened the bank. Its capital base has been more than doubled, to $6.3 billion, and its access to international capital markets has been facilitated by the award of two triple-A credit ratings by US agencies.

AFDB's Senegalese finance vice-president, Babacar N'diaye, is in the US this month to publicize the bank to US financial institutions and obtain a ''feel for the market'' - a preliminary step toward raising more long-term financing at fixed interest rates.

The bank has an image problem caused by having many of the world's poorest members, such as Chad, Mali, and Bourkina Fasso (Upper Volta), among its members. But no borrower has ever defaulted on a loan, and borrowings have been conservative in relation to the bank's capital base.

Another problem facing AFDB is that US banks, battling with huge problem loans in Latin America, are reluctant to increase their exposure elsewhere in the developing world.

Despite the steady growth in lending - AFDB expects to approve loans worth more than $1 billion in 1984, against $2.3 million in 1967, the first year of operations - African living standards have eroded during the past seven years. Per capita income has declined in about half the member countries, while health, education, and transport infrastructure have deteriorated because of lack of maintenance.

The bank has responded by launching a $7.3 billion investment program for 1982-86. Agriculture is being given top priority. Last year AFDB financed a $36 million cattle-raising project in Gabon and a $20 million project in The Gambia. The bank funded a $16 million rice project in Guinea-Bissau and a $55 million rural development project in the Republic of Guinea. AFDB promotes all kinds of agricultural projects: large or small, sectoral or crop specific, irrigated or rain fed.

It also makes a special effort to promote regional projects aimed at making African economies more complementary among themselves. It has financed sections of the trans-Africa highway from Lagos, Nigeria, to Mombasa, Kenya, as well as West African regional telecommunications and energy projects.

Some bankers have been concerned by an arrears of capital subscription payments by African members, but AFDB officials say the arrears have been reduced. Some also call AFDB's $7.3 billion five-year lending program too ambitious. ''It faces major problems both in mobilizing and disbursing the funds ,'' one said. Bank officials argue that confronted by Africa's mounting poverty, they have no choice but to increase their efforts.